October 25, 2011

A new study by the Federal Trade Commission found that drug companies entered into 28 "pay for delay" deals with generic rivals in fiscal year 2011, continuing a trend that agency chairman Jon Leibowitz says is costing consumers and the U.S. government billions of dollars a year.

According to the FTC, the agreements in 2011 involved 25 different brand-name drugs with combined annual U.S. sales of more than $9 billion.

The FTC in recent years has challenged pay for delay deals as anti-competitive. Such arrangements typically involve a brand-name drug maker paying a generic firm to settle a patent challenge and, in turn, delaying the introduction of a lower-cost generic version of the medicine.

“While a lot of companies don’t engage in pay-for-delay settlements, the ones that do increase prescription drug costs for consumers and the government each year,” Leibowitz said in a news release.

But the agency has had difficulty persuading courts that pay for delay is illegal. In March, the U.S. Supreme Court let stand a decision from the U.S. Court of Appeals for the 2nd Circuit that found a pay for delay deal between Bayer AG and Barr Pharmaceuticals (now owned by Teva Pharmaceuticals) to drop a patent lawsuit over the antibiotic Cipro did not violate antitrust laws.

The FTC also lost a case in the 11th Circuit challenging a pay for delay deal between Schering-Plough Corp., Upsher-Smith Laboratories and American Home Products Corp. involving the high blood pressure medication K-Dur 20.

Earlier this month, Sens. Herb Kohl (D-Wis.) and Charles Grassley (R-Iowa) urged the super committee charged with reducing the budget deficit to include a pending bill that would make pay for delay settlements illegal. The Congressional Budget Office estimated that the bill would save the federal government – which pays approximately one-third of all prescription costs – $2.68 billion over ten years.

“It won’t solve our fiscal problems, but every little bit helps,” Grassley said in a statement.